U.S. Bancorp (NYSE:USB) saw earnings drop 13.9% in the third quarter to $0.99 per share, but the bank beat earnings estimates and showed improvement over last quarter, helped by lower provision for credit losses.
Net income fell 20% to $1.58 billion compared to the third quarter of 2019, but net revenue was actually up slightly, 0.7%, to $5.96 billion, buoyed by a 3.7% increase in non-interest income. The non-interest income jump was due in part to strong growth in mortgage banking revenue primarily from refinancings. Overall, average total loans were up 2.2% year over year.
U.S. Bancorp's non-interest income gains were offset by lower net interest income due to the interest rate environment, an increase in expenses, a higher provision for credit losses due to the pandemic and recession, and the acquisition of the State Farm credit card portfolio.
The provision for credit losses was $635 million, which is still higher than a year ago, when it was $367 million, but much lower than the second quarter of this year when the bank set aside $1.7 billion.
Overall, the bank showed improvement compared to the second quarter, with provision for credit losses down 63%, revenue up 2.2%, and net income up 128% quarter over quarter.
"Our mortgage banking business was particularly strong in the third quarter as we continued to support customers' home financing and refinancing needs, and our payments businesses benefited from improving consumer spending activity as state and local economies continued to open," said the bank's chairman, CEO, and president, Andy Cecere.
Also, U.S. Bancorp also posted a return on common equity of 12.8%, which is higher than average and up from 5.3% in the second quarter. The return on average assets was also up, from 0.51% in the second quarter to 1.17% in Q3. In addition, the common equity tier one ratio increased to 9.4% from 9% last quarter.